Demand & TRIBE
What does the law of demand state?
As price increases, quantity demanded decreases.
What does a leftward shift in the supply curve indicate?
A decrease in supply.
What does PED measure?
How quantity demanded responds to price changes.
Where is market equilibrium?
Where QD = QS.
What is comparative advantage?
Producing at lower opportunity cost.
What does a rightward shift in the demand curve represent?
An increase in demand.
What does the 'T' in I-RENT stand for?
Technology.
PED > 1 means demand is...?
Elastic.
What is consumer surplus?
Difference between willingness to pay and price.
What does a tariff do to imports?
Raises price, lowers QD.
Name the TRIBE factor that deals with subsites and complements.
R - Changes in related goods.
What happens to supply if oil prices decrease?
Supply increases (shifts right).
List two factors that make demand more elastic.
More substitutes, time, % of income
What happens in a surplus?
QS > QD, price falls.
Who benefits from free trade?
Domestic consumers.
If cookie prices drop, what happens to milk demand?
It increases (complements).
More producers enter the market. What happens?
Supply increases (shifts right).
What does PES measure?
How quantity supplied responds to price.
What does a price ceiling cause?
A shortage.
What is the result of a quota?
Same as tariff, no tax revenue.
What kind of good is instant ramen if income increases and demand decreases?
Inferior.
If suppliers expect prices to rise, what do they do now?
Supply less today.
Name one factor that makes supply more elastic.
Time, inputs, flexibility.
What happens to consumer surplus when price decreases?
What happens to consumer surplus when price decreases?
What does tax incidence depend on?
Elasticity of demand and supply.